Nike’s Future-Proofing Breakup with Amazon

As the world’s largest retailer, Amazon is bigger than 21 of the other largest retailers combined– a list which includes household names like Walmart, Target, and Best Buy. With such an expansive reach, Amazon has played a significant e-commerce role for CPG, consumer electronics, and apparel brands. It has also helped establish and grow numerous smaller brands that didn’t have the initial distribution clout needed to be sold at the Walmarts and Targets of the world. And unsurprisingly, as Amazon grew, so too did its share of the search business. Today, more than half of product searches begin on Amazon versus Google.

With such astronomical growth and ease of shopping and product fulfillment (same day delivery!), it’s no wonder the online giant is a no-brainer for brands looking to set up shop online.

That is, now with the exception of one major global brand: Nike.

Earlier this month, Nike announced that they will pull their products from Amazon. The move came as a surprise to many and left some industry experts scratching their heads over why such a ubiquitous brand would give up a seemingly massive opportunity. 

While there are surely many reasons behind the decision- one of which being Amazon’s inability to police counterfeit products-, we see it boil down to one overarching motivator: Nike wants to own their shopping experience. 

As Internet privacy regulations become increasingly commonplace and 3rd party cookies become more scrutinized, there is a growing need for brands to own their customer experiences. This necessitates heavier reliance on 1st party data, even if it comes at the cost of scale. With GDPR, CCPA, and several other privacy laws waiting in the wings, advertisers are scrambling to ensure that their marketing plans don’t get turned upside down due to reliance on data that isn’t theirs. Nike’s move indicates that they understand exactly what’s at stake.

By shifting the shopping experience to their owned and operated properties, the brand can have real-time visibility into customer data that historically would have come from Amazon (or any other 3rd party retailer) at a delay. More on what that means below, but the bottom line is this: the decision allows Nike to build a strong, sustainable foundation upon which to position itself as a one-stop-shop for athletic and athleisure wear consumers without being jeopardized by privacy restrictions.

Modern consumers expect a better online experience, and the brand knows that data- up-to-date data, to be exact- is critical in determining whether an experience will be good or bad. If a consumer went to Amazon and bought a certain shoe, for example, that transaction wouldn’t be completely transparent to Nike. Amazon would pass back some of the data, such as the item sold and the price, but many other factors would remain a black box.

To illustrate the complexity of a single transaction, let’s dissect it into all its components:

• Customer (for simplicity’s sake, we’ll just call this email)
• Item purchased (includes SKU, price, and size)
• Previous purchase behavior
  

Nike no longer has to rely on Amazon for this data. By owning it outright, the brand is able to streamline the marketing decision-making process. Outputs might include:

• Excluding the customer from seeing online ads for the product they purchased
• Upselling products based on new model of shoe in 6-12 months, especially if it’s available in the size the customer previously bought
• Cross-selling complementary products
  

Data ownership allows Nike to do all of these things in a much faster way, which results in minimized waste and maximized investment. If there’s any brand that can appreciate shaving time off to improve results, it’s a performance brand like Nike.

Data ownership allows Nike to do all of these things in a much faster way, which results in minimized waste and maximized investment. If there’s any brand that can appreciate shaving time off to improve results, it’s a performance brand like Nike.

In the digital age, privacy reigns supreme. Brands therefore need to configure their 1st party data strategies today to avoid seeing their marketing plans rendered useless by the regulations of tomorrow.

At Jellyfish, we partner with our clients to a) make them aware of impending marketplace changes, and b) help them define their 1st party strategy by getting their internal systems connected.

If you’re curious how data ownership and future privacy regulations could impact your brand, drop us a line at hello@jellyfish.com. We’d love to discuss how to position you for success.